🌊 The Trade War Begins

The year is 2025.

Donald Trump is President. Republicans are fighting for a Kennedy in the Cabinet. All three Ball brothers turned out to be successful. And Beyoncé won best country album at last night’s Grammy Awards show.

Have fun telling all that to the guy who just awoke from a 10-year coma.

–Max and Max

KEY STORY

Hamas Hostage Spectacle

Hamas has turned hostage releases into elaborate ceremonies

• At the first exchange, Hamas members gave three Israeli hostages bags containing a certificate of their captivity and release, a necklace, and photos of their time in captivity. The women were forced to run past shouting crowds to a Red Cross reception team

• The releases have since grown more elaborate: At one, Hamas put four female hostages in military-esque attire and had them wave at crowds from a stage, with Red Cross representatives seated nearby; at another, Hamas released hostages in front of thousands of shouting men who gathered outside former leader Yahya Sinwar’s home

Dig Deeper 

• Analysts say Hamas is trying to demonstrate its power and popularity and prove that it remains a viable governing and fighting force

• Israel has delayed some prisoner releases in response, and some analysts say the ceremonies risk derailing the ceasefire altogether

• Prime Minister Netanyahu said last week, “I view with utmost severity the shocking scenes during the release of our hostages…I demand that the mediators make certain that such terrible scenes do not recur, and guarantee the safety of our hostages”

KEY STORY

Open-Source AI?

Sam Altman said he is considering making OpenAI’s models open-source

• Some AI models are proprietary, meaning their architecture, training data, and fine-tuning processes are closed to the public. In contrast, open-source models make their code and sometimes training data available for public use, allowing developers to modify and deploy them independently. Among Big Tech companies, only Meta has developed open-source models

• In a Reddit “ask-me-anything” on Friday, Sam Altman wrote, “I personally think we have been on the wrong side of history here and need to figure out a different open source strategy”

• The statement came after China’s DeepSeek cheaply developed a leading model on Meta’s open-source one

Dig Deeper

• Upon launch in 2015, OpenAI had said it would make much of its data public. It changed that policy, citing safety and business risks

• Mark Zuckerberg and Meta, by contrast, chose to open source their main Llama model in order to provide infrastructure that other developers could build upon, thereby making Meta vital to many other models

ROCA’S SPONSOR

Will Trump expand H1-B?

Together with Kalshi

Will Trump expand the H1-B Program? When will TikTok return to the App Store? Will the Israeli parliament be dissolved this year? When will Bitcoin hit $150k?

• Instead of just debating these topics with friends, you can now bet on them with Kalshi

• Kalshi lets you bet on real-world events – from elections to the Super Bowl and inflation to crypto and the Oscars – and provides real-time odds for them

• We track Kalshi for major events since its odds are often more accurate than polls

• Use code ROCA to get $20 for free once you trade $100

• Join Kalshi today: https://kalshi.onelink.me/1r91/rocanews

KEY STORY

Venezuela to Take Migrants

Venezuela agreed to accept deported migrants

• Up to 700,000 Venezuelans have entered the US illegally in recent years. They have been shielded from deportation for two reasons: Venezuela’s government could refuse to take them, and many had Temporary Protected Status (TPS), a US policy that prevents people from deportation to politically unstable countries

• After assuming office, Trump revoked TPS protections for roughly 300,000 Venezuelans. On Friday, he sent an envoy to negotiate about deportation flights; a day later, President Maduro agreed to accept deportees. He also agreed to free six jailed Americans

Dig Deeper

• Separately, the US began sending soon-to-be-deported migrants to Guantanamo Bay, on Cuba, this weekend

• Trump has ordered the base to prepare to hold up to 30,000 migrants

• He’s said the “worst” migrants will be sent there before deportation. Rights groups say the transfers are a way to cut migrants off from legal defense and services

KEY STORY

Trade War Begins

President Trump enacted tariffs on Mexico, Canada, and China

• The countries are the US’ three largest trading partners, accounting for a combined ~41% of US trade last year. Trump applied 25% tariffs on all Mexican and Canadian imports, and boosted existing ones on China by 10%

• While the US has a free-trade deal with Mexico and Canada, he has accused the countries of stealing US jobs and letting migrants and fentanyl into the US

• In announcing the tariffs, Trump cited “the major threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl.” Canada and Mexico vowed to retaliate with tariffs on American goods

Dig Deeper

• The tariffs will have far-reaching impacts on the American, Canadian, and Mexican economies

• Many companies’ supply chains cross the borders, with goods often moving between the countries multiple times before being sold

• Numerous analyses have found that the tariffs could tip Canada and Mexico into recession. Others have found that the US could experience an increase in inflation: The Peterson Institute, a leading economic think tank in Washington, DC, has predicted the tariffs will increase US inflation by .5 percentage points in 2025

• Trump has downplayed the risk of blowback, saying, “I think there could be some temporary, short-term disruption, and people will understand that…The tariffs are going to make us very rich and very strong”

RUNDOWN
Some Quick Stories for the Office

🇨🇳 A former senior Federal Reserve official was arrested over accusations that he shared economic secrets with China

📧 Leaked confidential emails from the Biden Department of Justice showed internal anger about Biden’s pardon decisions

🛬 A medical jet carrying six passengers crashed in Northeast Philadelphia, killing everyone on board and one person on the ground

🇸🇴 President Trump ordered airstrikes on Islamic State members in Somalia. "The strikes destroyed the caves they live in, and killed many terrorists without, in any way, harming civilians," he wrote

💰 Officials from the Department of Government Efficiency (DOGE) were granted access to the Treasury Department’s payments service, which oversees trillions of dollars in government payments to contractors, welfare recipients, and others

COMMUNITY
What does Roca Nation think?

🧠 Today’s Question: Would you ever drink raw milk?

Reply to this email with your thoughts!

POPCORN
Some Quick Stories for Happy Hour

🏀 Luka to the Lakers?!: The NBA world was rocked early Sunday morning when the Dallas Mavericks traded Luka Doncic to LA in exchange for Anthony Davis and a 2029 first-round draft pick

⛄ Groundhog Day: Punxsutawney Phil emerged on Sunday to see his shadow and predict six more weeks of winter in front of a record crowd in Gobbler’s Knob, Pennsylvania

🇺🇸 From Dulles to Donald: A GOP congressman introduced a bill to rename Washington Dulles International Airport after Donald Trump

💸 “Promoted Outwards”: LVMH CEO Bernard Arnault coined a luxurious new term for layoffs after saying that recent job cuts marked a chance for employees to be "promoted outwards, so to speak"

🚙 ICE Cream Van: A Las Vegas ice cream vendor’s "Ice Cream Patrol" truck went viral on TikTok when users mistook it for an undercover Immigration and Customs Enforcement (ICE) vehicle

🐀 The Other Rat Race: Climate change is creating a "perfect rat storm,” with a new study finding that warming temperatures are expected to help rat populations rise in 11 of 16 major world cities

ROCA WRAP
China’s Big W?

DeepSeek’s release of its AI chatbot R1 rattled the stock market and crashed tech stocks earlier this week. But what is it?

In 2015, Liang Wenfeng started High-Flyer, an AI- and mathematics-based hedge fund. In 2016, the fund created an AI model that allowed the company to make stock picks based on AI projections. Three years later, the company invested around $28M to build new AI training models.

Building the most advanced AI models typically requires the use of Nvidia graphics processing units (GPUs), which are capable of rapidly processing data. However, in 2021, the Biden Administration restricted exports of these chips to China, introducing obstacles to the country’s AI projects. Just before the US implemented that policy, Liang bought thousands of Nvidia processors to begin developing new AI projects.

In 2023, he used those chips to spin out an AI company, DeepSeek. Last spring, DeepSeek launched an AI model in China that undercut the prices of Chinese Big Tech companies, rocking the Chinese AI landscape.

Last week, it was the US’ turn: DeepSeek unveiled R1, an AI model capable of competing with the most advanced ones created by tech companies like OpenAI. Unlike OpenAI, though, which had spent billions of dollars, DeepSeek claims to have built its model on a shoestring $5.5M budget. The company says it used just 2,000 Nvidia chips, compared to the 16,000+ used by US firms with similar products.

Many in the US tech industry responded with skepticism: The CEO of US-based Scale AI claimed that DeepSeek has 50,000+ Nvidia chips they can’t disclose due to export controls, to which Elon Musk replied “obviously.”

Still, the news rocked tech valuations and prompted OpenAI boss Sam Altman to say, “[It’s] legit invigorating to have a new competitor.”

The arrival of a new highly-effective, China-based AI platform has raised security concerns. The app quickly hit the top spot on Apple’s App Store – ousting ChatGPT – before the company announced it would temporarily limit registrations due to a “large-scale cyber attack” on its services (it provided no further detail on the attack).

Beyond the threat to American AI dominance, cybersecurity analysts have voiced privacy concerns: DeepSeek’s privacy policy explicitly states that it collects “user input” (i.e. chat history) and device information including model, keystroke patterns, and IP address – far more information than US AI companies collect.

All data is stored in Chinese data centers with the potential to be accessed by the Chinese government, as per Chinese law. Given the US concern about Chinese access to US data, DeepSeek could potentially face a similar fate as TikTok.

DeepSeek has also faced allegations of intellectual property theft, with a source at OpenAI claiming this week that the company “[took] our technology and [used] it to build their own product.” OpenAI said in a statement, “We know that groups in the PRC are actively working to use methods, including what’s known as distillation, to try to replicate advanced US AI models.”

Yet others have pointed out that IP theft may be how OpenAI and other AI companies got to where they are: The companies have faced many lawsuits alleging that they stole the IP of news companies, authors, and others to build their models.

And some analysts have claimed that China’s isolation led to the company’s stunning success: By cutting it off from chips and other resources, the company had to do more with less. That forced it to build on Llama, a set of AI models developed by Meta, and thereby cut costs.

Liang has said that DeepSeek must “explore new model structures to achieve superior capabilities within limited resources.”

If its success is as real as it appears, DeepSeek is doing just that.

EDITOR’S NOTE
Final Thoughts

Today is the birthday of Sean Kingston. Ahh, nostalgia. Life was much simpler when we were dancing to "Fire Burning" at a middle school mixer, Axe body spray dripping off our Hollister polos. We wish Sean Kingston, an inspirational artist and fire safety advocate, a very happy birthday. And to Roca Nation, a happy Monday.

–Max and Max